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Trading America's Debt Binge

Monday, 11 Oct 2010 | 6:30 PM ET

In a week-long series, "Fast Money" is examining how consumer credit cutbacks are affecting different sectors of the US economy. On Monday's program, the traders looked at how consumer deleveraging is impacting banks.

Americans are tightening their belts more now than ever before, reports CNBC's Melissa Lee. But Americans aren't putting much of a dent in their debts, as they've paid down just 0.08 percent of their $12.6 trillion in debt, according to reports. The rest of the decline is due to defaults, whereby more people are willing to walk away rather than pay their oversized mortgages and high interest credit cards.

Credit Rehab
Americans are cinching their belts tighter than ever before.

Lenders have charged off more than $600 billion in mortgages and consumer loans. Banks wrote off more than 10 percent of credit cards in August, up more than half a percent in July. The rising savings rate made it look like Americans were saving more, but really the banks are getting burned.

A lot of banks have been halting foreclosures and that puts the economy at risk, said Brian Kelly of Kanundrum Capital. The banks will just horde more cash and that creates more uncertainty, he said. If you want to play banks, he would stay away from the money center banks and if you think the market is going higher, he recommends a broker like Goldman Sachs.

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Trader disclosure: On Oct.11, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Seymour owns (AAPL), (GE), (GOOG), (INTC), (MON), (MSFT), (MOS), (POT); Pete Najarian owns (DD); Pete Najarian owns (GE); Pete Najarian owns (POT); Pete Najarian owns (BEXP) calls; Pete Najarian owns (BP) calls; Pete Najarian owns (BME) calls; Pete Najarian owns (ERTS) calls; Pete Najarian owns (GDXJ); Pete Najarian owns (BRCD); Pete Najarian owns (CNI); Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)
For Brian Kelly
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (GPRE)
Accounts managed by Kanundrum Capital own (JJG)
Accounts managed by Kanundrum Capital own (SGG)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (AGM)
Accounts managed by Kanundrum Capital own (MSFT)
Accounts managed by Kanundrum Capital own (FRO)
Accounts managed by Kanundrum Capital own (GLGC)
Accounts managed by Kanundrum Capital own (GS)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (UUP)
Accounts managed by Kanundrum Capital are short (HYG)
Accounts managed by Kanundrum Capital are short (SLF)
Accounts managed by Kanundrum Capital are short U.K. Pound
Accounts managed by Kanundrum Capital are short Mexican Peso
For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AMGN)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
For Stephen Volkmann
***No Disclosures***
For Barry Ritholtz
***No Disclosures***
For Kevin Cassidy
Stifel, Nicolaus & Company, Inc. makes a market in the securities of Advanced Micro Devices, Inc..
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from Advanced Micro Devices, Inc. in the next 3 months.
Stifel, Nicolaus & Company, Inc. makes a market in the securities of Intel Corporation.
Intel Corporation is provided with investment banking services by Stifel, Nicolaus & Company, Inc. or was provided with investment banking services by Stifel Nicolaus or an affiliate within the past 12 months.
Intel Corporation is a client of Stifel, Nicolaus & Company, Inc. or an affiliate or was a client of Stifel Nicolaus or an affiliate within the past 12 months.
Stifel, Nicolaus & Company, Inc. or an affiliate has received compensation for non-investment banking, securities related services from Intel Corporation in the past 12 months.
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from Intel Corporation in the next 3 months.
Intel Corporation is provided with non-investment banking, securities related services by Stifel, Nicolaus & Company, Inc. or an affiliate or was provided with non-investment banking, securities related services by Stifel Nicolaus or an affiliate within the past 12 months.
Stifel, Nicolaus & Company, Inc. makes a market in the securities of NVIDIA Corporation. Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from NVIDIA Corporation in the next 3 months.

CNBC.com with wires.

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